The Education Scam

In the news lately is the plight of the students. Everybody tells them they should go to college. But college is expensive. And since nobody has any money in America, they have to borrow. They end up with a worthless college degree and, on average, about $25,000 in debt.

This scam takes place on several levels. The whole nation gets scammed into thinking that “education” is a good thing.

Here’s a typical newspaper article, this one from The Wall Street Journal:

“Education Slowdown Threatens US”

“Throughout American history,” the article begins, “almost every generation has had substantially more education than that of its parents. That is no long true. When baby boomers born in 1955 reached age 30, they had about two more years more schooling than their parents, according to Harvard University economists Claudia Goldin and Lawrence Katz… But in 2010 they averaged only about 8 months more schooling than their parents.”

The article goes on to tell us that college graduates have less trouble getting a job than those who only graduated from high school. But so what? Suppose everyone had a Ph.D. Would jobs suddenly appear for them?

“The wealth of nations is no longer in resources. It’s no longer in physical capital. It’s in human capital,” says an expert quoted by the paper.

Elsewhere in the blahblahsphere, Larry Summers, former secretary of the Treasury, challenged Mitt Romney to present a budget plan, which among other things, included more “investment” in…yes…you guess it…education!

But “investments” in education have been increasing for the last 40 years…and for the last 40 years…there has been not one penny of return.

So, let’s follow the money. The feds give students money…or give it to the universities directly. Either way, it ends up in the pockets of the education industry. Unemployment has gone up and down…with no relation to the supposed investments in education. Employees — including those with college degrees — have not earned a penny more in real hourly wages. And test scores show they don’t know anything more than they did, at far lower investment, 4 decades ago.

Because the money comes out of nowhere. It’s nowhere money. Might as well bailout the financial industry. And “invest” in healthcare too.

But the nowhere money is not with no cost. It looks just like other money. And it buys the same things. So, the guy who has it is able to use it to take away resources from other people.

Follow the money. From the Fed to the feds…to the favoured, no-return industries — health, education, finance and the military.

The zombies get more money. The rest of the economy ends up with less.

And now, much of the cost rests on the shoulders and backs of young people in the form of unpaid student loans, from MSNBC:

Here’s what we do know about student loan debt: it’s roughly $1 trillion in size, greater than either auto or credit-card debt and second only to mortgage debt in the US.

Borrowers in their 30s today owe $28,500, on average. The debt burden has soared just as — and partly because — the recession hit, so younger graduates carrying the highest balances are hit with the double whammy of a weak job market (that still isn’t showing any sign of rapid improvement).

And this all comes as globalization and technological change have upended once-reliable career paths, wiped out many mid-level professional jobs and leave low-paying fields in health, food and beverage services, and retail as among the fastest growing job markets over the next decade.

Oh, and consider that student loan debt remains one of the most difficult types to forgive or discharge in bankruptcy, in part because the federal government (i.e. taxpayers) made or guaranteed 80 percent of all outstanding student loan debt as of last year. And finally, that once loans in deferral or forbearance are excluded, the delinquency rate on student loan debt was an estimated 27 percent as of the third quarter of 2011, according to a study by the New York Fed.

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.

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